Lyle, Siegel, Croshaw & Beale, P.C. v. Tidewater Capital Corp.
Virginia Supreme Court
457 S.E.2d 28 (1995)
Tidewater Capital Corporation (Tidewater) (plaintiff) was a real estate investment company. Lawrence Siegel was president, a director, and a 50 percent shareholder of Tidewater. Siegel was also a partner in the law firm Lyle, Siegel, Croshaw & Beale, P.C. (the firm). Galaxy-Wide Products, Inc. (Galaxy) purchased consumer contracts from companies that sold products door to door. Galaxy asked Siegel for assistance in finding a lender. After obtaining authority from Tidewater to negotiate a loan, Siegel prepared terms that Tidewater’s board of directors approved and to which Galaxy agreed. The loan was secured by all of Galaxy’s assets, consisting principally of Galaxy’s consumer contracts that Siegel had reviewed and concluded were accounts receivable. An associate attorney at the firm prepared the loan documents and took the necessary steps to perfect Tidewater’s security interest in Galaxy’s assets, and Siegel signed the security agreement as president of Tidewater. Shortly thereafter, Siegel sent a memorandum to another Tidewater director recommending that some of Galaxy’s contracts be sold. Siegel signed as Tidewater’s president two security agreements that permitted Galaxy to sell the loan collateral and gave Tidewater a security interest in the proceeds. Tidewater never took physical possession of any of the collateral. Galaxy subsequently sold some of its contracts free of Tidewater’s lien. Tidewater declared Galaxy in default and thereafter settled with Galaxy to avoid posting a bond and risk being an unsecured creditor in Galaxy’s threatened bankruptcy. When the firm refused to indemnify Tidewater against any losses, Tidewater sued the firm for malpractice. The firm maintained that Siegel’s actions in negotiating the loan, reviewing the collateral, and signing documents as Tidewater’s president should be imputed to Tidewater and the malpractice action barred by Tidewater’s contributory negligence. After a jury trial, the court struck the firm’s evidence and entered summary judgment in favor of Tidewater. The firm appealed.
Rule of Law
Holding and Reasoning (Stephenson, J.)
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